Is the concept of outright ownership coming to an end?

Published,22 March 2018

Investigating the introduction of ‘Mobility as a Service’

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The phenomenal growth in personal contract purchase (PCP) plans in recent years is a powerful indicator that the concept of outright ownership and its importance to consumers has significantly reduced. The figures speak for themselves with data from the Finance & Leasing Association (FLA) revealing that almost 90% of all new car registrations last year used some form of credit. PCP was by far the most popular funding method out of the £44 billion of credit provided by FLA members in 2017.

To put this into context, car buyers now view the process of purchasing a vehicle as being similar to arranging their next mobile phone contract. Selecting a car based on specific parameters, such as key features, monthly budget and anticipated mileage is the same as choosing a phone contract based on the need for a particular handset, airtime and data requirements. It is arguable that the only difference, apart from cost, is that the PCP is effectively funds a vehicle’s depreciation, whereas a phone contract does not involve a ‘balloon’ payment at the end of the term, or return of the handset.

From the motor retailer’s perspective, offering customers a complete and bespoke ‘mobility solution’, as opposed to selling them a car is a highly topical issue. Global tech companies such as Google and Apple are already seeking to disrupt the established motor manufacturer business model through their plans to introduce driverless cars.

Vehicle manufacturers are responding to the threat of disruption by embracing the concept of Mobility as a Service, or MaaS

“We’re going to see a very different state of play in the next couple of decades,” said Richard Brown, Manager of Ford’s Advanced Product Group “and the car is going to be part of the internet of things that everyone is talking about. You have to be prepared to embrace the potential disruption and be excited by the challenges that lie ahead. We’ve seen over the past five or 10 years a number of major global companies that didn’t recognise the changes that were happening around them and they don’t exist anymore.”

Vehicle manufacturers are responding to the threat of disruption by embracing the concept of Mobility as a Service, or MaaS. The thinking behind MaaS is that various forms of transport service are integrated into a single ‘mobility service’ that’s instantly accessible on demand. To meet a customer’s request, a MaaS provider facilitates a diverse menu of transport options, be it public transport, car or bike-sharing, taxi or car rental/lease, or a combination.

For the user, MaaS providers can offer added value through the use of a single app with a single payment channel, as opposed to multiple ticketing and payment points. MaaS aims to give users the best value proposition, helping them meet their mobility needs as conveniently as possible. MaaS also presents vehicle manufacturers and retailers with the opportunity to embrace new business models.

As well as transport, there’s the opportunity to provide a host of complimentary services to the extent that the actual vehicle could become less valuable than the data derived about the consumer from connectivity to the car. This could include intelligence on where they travelled, what they listened to and even watched in the case of fully autonomous vehicles, enabling bespoke content to be produced and monetised.

Manufacturers with early car-based MaaS solutions include Audi with its ‘Audi On Demand’ concept, which has been trialled in San Francisco, Munich and Beijing and set to be launched in the UK towards the end of 2018. The scheme offers the full range of Audi models via a smartphone app and price plans ranging from a single hour up to a week. Users choose a vehicle from a stock list and the car is delivered within two hours of it being ordered.

Meanwhile, BMW has successfully established DriveNow, a car sharing joint venture with hire company, Sixt. Already available in 13 European cities including London, DriveNow offers BMW and MINI cars to rent and is based on a ‘free floating’ principle. This allows vehicles to be hired and returned independent of location, within a defined area. Over 970,000 registered users can now find and reserve one of almost 6,000 cars using the DriveNow App or website.